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Businesses face stricter compliance and harsher penalties under the Modern Slavery Act

Businesses face stricter compliance and harsher penalties under the Modern Slavery Act

United Kingdom
28.05.2019

The Home Office commissioned Rt Hon Frank Field MP, Baroness Elizabeth Butler-Sloss and Maria Miller MP to review the operation and effectiveness of the Modern Slavery Act 2015 (the “Act”) and to recommend improvements. The final report of the review has now been presented to Parliament and can be accessed here.

The review was broad, with one area of particular focus being section 54, which relates to transparency in supply chains. The report identifies several deficiencies with the Act and makes a number of recommendations in this area to strengthen the current regime. Businesses would be wise to take note.

Section 54 of the Act requires commercial organisations with an annual turnover of £36 million or more to publish an annual modern slavery statement setting out the steps that they have taken in the last financial year to ensure that modern slavery or human trafficking is not taking place in their business or supply chains, or that no such steps have been taken. The statement must be approved by a member of the board of the relevant organisation and, if it has one, published on its website.

Section 54 is light on detail and the review highlighted that many businesses ignore it or respond to the requirement as a tick box exercise, and that the quality of modern slavery statements produced has been poor. Whilst the Act provides for the Secretary of State to be able to seek injunctive action against non-compliant companies this has not happened and there are no penalties for non-compliance.In summary, the review determined that the lack of clarity, guidance, monitoring and enforcement of modern slavery statements needs to be addressed.

As a result, the report makes the following recommendations:

section 54 requirements should be extended to the public sector and the government should strengthen its procurement processes to make sure non-compliant companies in scope of section 54 are not awarded public contracts;

the government should establish an internal list of those companies in scope of section 54. However, individual companies shall remain responsible for determining if they need to produce a modern slavery statement and non-inclusion in the list will not be an excuse for non-compliance;

businesses should no longer be able to produce a modern slavery statement stating that they have taken no steps to address modern slavery or human trafficking taking place in their business or supply chain.Instead they will need to produce a form of statement which details the steps they have taken;

it should be mandatory for businesses to include certain information in their modern slavery statement, including the six areas set out in the government guidance, and if one area is not applicable the company must explain why;

companies should be required to consider the entirety of their supply chain in relation to the risk of modern slavery, and if they do not do so they will be required to explain why they have not done so;

the Companies Act 2006 should be amended to require companies to refer to their modern slavery statement in their annual reports, or section 54 should impose a similar obligation on non-listed companies;

companies should be required to have a named, designated board member who is personally accountable for the production of the modern slavery statement. Failure to report or act in instances of modern slavery should be an offence under the Directors Disqualification Act 1986;

the government should set up a central repository of statements to allow it to better monitor compliance (at present the government relies on registers set up by other organisations such as TISC). Companies should be required to upload their modern slavery statement to the register and it should be easily accessible to the public, free of charge. Aligned with this, modern slavery statements should be dated and state which financial year they relate to so that progress can be monitored;

the Independent Anti-Slavery Commissioner should monitor compliance annually and oversee the guidance available to companies;

an enforcement body should be established to impose sanctions against non-compliant companies. Such sanctions could include initial warnings, fines (as a percentage of turnover), court summons and directors’ disqualification; and

the Anti-Slavery Commissioner to obtain research on how consumer attitudes on modern slavery can be influenced, with the aim of leveraging purchasing power to eradicate modern slavery in supply chains.

The above recommendations are aimed at clarifying which companies are in scope of section 54, improving the quality of statements, embedding modern slavery reporting into business culture, increasing transparency and increasing monitoring and compliance enforcement. The reviewers will be establishing an implementation group to ensure that the government put in place steps to reflect their recommendations. The timeframe for implementation of these recommendations is not yet known but the report encourages government ministers to act quickly to strengthen the existing law and to ensure that the UK remains a leader in the international efforts to eradicate modern slavery.

The employment team at CMS have advised numerous clients on the impact of section 54, business and supply chain due diligence, the introduction of relevant business policies and the preparation and publication of modern slavery statements. Please contact Sarah Ozanne or Anthony Hollands if you would like to discuss how these issues affect your business.

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